Want to learn how to dissolve an LLC? When you dissolve an LLC, you ensure that you avoid ongoing taxes and fees, put creditors on notice, and fulfill state requirements.
if you think that your LLC has reached the end of its life, it just might be time to dissolve it. However, it should be noted that if you fail to dissolve your company within a specific period, you’ll be faced with a series of penalties, taxes, and even some legal issues. At the start of your business, everything felt right and we’re sure that you took the time to make each decision with care.
Going out of business is never a fun experience and may take you some more time before you decide to finally wrap things up. However, you’ll need to get a move on when it comes to notifying your creditors and filing paperwork with the state. When these things are done, you’ll soon be able to move forward with the least amount of liability on your hands.
Learn everything you need to about an LLC (limited liability company).
Why Should You Dissolve An LLC?
At the time of formation, a series of legal documents were filed with the state’s legal office. There’s a good chance that the licensing authorities, the taxing authorities, and the Internal Revenue Services were also involved in the formation process. The documents filed would have been a clear indication that your company was up and running.
Only when closure documents are submitted then will they know that you’re going out of operation. Hence, they will expect that you pay annual fees, file annual reports, and even pay the required amounts in taxes. When you dissolve your LLC, this will be the endpoint of all of these requirements.
Additionally, creditors will be notified that the LLC is no longer legally able to collect debts. A formal dissolution is one of the most effective ways to save yourself from a lawsuit.
Step 1 – Follow Your LLC Operating Agreement
To successfully dissolve an LLC, a set of specific instructions should have been made in the operating agreement. The following are the most common dissolution steps:
If for some reason your operating agreement doesn’t have a set procedure, you’ll need to contact your state officials for instructions.
- Allowing LLC members to vote in agreement to dissolve the company
- Taking a record of the vote in the meeting minutes
- Setting a dissolution date
- Distributing the assets of the LLC
- Settling business debts and notifying creditors
Step 2 – Close Your Business Tax Accounts
All LLCs have a couple of different tax accounts. These are generally maintained by various government departments. If you’re planning on dissolving, you’ll need to first pay any fines or taxes owed on these accounts.
The following are some of the most common taxes that you may owe:
- If your LLC had or has employees in the state, you’ll need to pay re-employment taxes
- If your LLC sold taxable services and goods in the state, then you’ll be required to pay Sales and Use Taxes
Closing LLC tax accounts is a straightforward process. Forms are filed and returned to the respective agencies. However, it should be noted that some companies usually require the submission of various paperwork. So, if you need further assistance, you’ll need to hire the services of an accountant. Be sure to look into your business banks accounts as well.
Step 3 – File Articles Of Dissolution
In the same way that you filed formation documents for your LLC, you’ll need to file dissolution papers before your LLC can be dissolved. It should be noted that these documents are typically filed in the same office as before. However, the cost for filing varies from one state to the other.
Some states generally require LLC owners to obtain certificates from the official taxing agency as proof that the LLC taxes are updated. If certificates were obtained, they should be submitted with the dissolution forms as needed.
How to Dissolve an LLC – Other Steps
If your LLC conducted business in more than one state, then you’ll need to also file with them. The filing process is mainly geared towards withdrawing the right to conduct business. If for some reason this isn’t done, you’ll be legally required to submit reports, and pay taxes.
LLC owners are also liable for filing both final employment returns and final tax returns. If you need more information on this, you can go to the Internal Revenue Services division and you’ll be able to utilize their checklist. The steps on the list will aid in the wrapping up process.
Shutting the doors on your LLC will be one of the hardest decisions that you’ll ever have to make. A clean dissolution will ensure that you don’t have to pay fees and it will unbind you from litigations and obligations. We hope you enjoyed our guide on how to dissolve an LLC.